What Is a Totalization Agreement?

A totalization agreement is a formal accord between the United States and another country that coordinates social security coverage and benefits for people who have worked in both nations. These agreements have two primary functions. First, they prevent dual social security taxation, where a worker pays social security taxes to both countries on the same earnings. The second objective is to help workers who have divided their careers meet the minimum requirements for retirement, disability, or survivor benefits by allowing them to combine work periods from both countries.

Eliminating Dual Social Security Taxation

The “territoriality rule” dictates that a worker pays social security taxes to the country where work is physically performed. This can create a financial burden for employees temporarily transferred abroad by a U.S. employer. In these situations, the worker and employer might be obligated to pay social security taxes to both the foreign country and the United States on the same earnings.

Totalization agreements establish rules to assign a worker’s social security coverage to only one country, resolving this issue. The primary way to document this exemption is with a Certificate of Coverage. Issued by the home country’s social security agency, this document verifies the worker is subject to its laws and exempt from taxes in the other country. For a U.S. worker sent abroad, the Social Security Administration (SSA) issues the certificate.

To request a Certificate of Coverage, an employer or self-employed individual must provide the following information:

• The worker’s full name, date and place of birth, and country of citizenship
• The worker’s U.S. Social Security number
• The name and address of the employer in both the U.S. and the foreign country
• The anticipated start and end dates of the employment period abroad

How to Get a Certificate of Coverage

The most efficient way for a U.S. employer or self-employed person to get a Certificate of Coverage is through the Social Security Administration’s (SSA) online service. The application is started by using the “Request a Certificate of Coverage” feature on the SSA’s website. This portal allows employers to request certificates for their employees or for self-employed individuals to apply on their own behalf.

For those unable to use the online system, a paper application can be mailed to the SSA’s Office of Earnings and International Operations. Processing times can vary from weeks to months, so it is advisable to apply as soon as the foreign assignment is confirmed. Upon approval, the SSA issues the Certificate of Coverage, and the worker should provide a copy to their foreign employer or relevant authorities.

Qualifying for Benefits Through Totalization

Totalization agreements help individuals qualify for benefits when their work history is split between countries. Many social security systems, including the U.S. system, require a minimum number of work credits to be eligible for retirement, disability, or survivor benefits. For instance, U.S. retirement benefits require 40 credits, which is about 10 years of work, a threshold a worker with a divided career might not meet in one country.

Totalization agreements allow the social security agencies of both countries to combine, or “totalize,” the work credits earned in both systems. If combined credits meet the minimum requirements, a country can pay a partial benefit. For the U.S. to consider foreign credits, a worker must have earned at least six quarters of U.S. coverage. Foreign credits are used only to establish eligibility and are not added to the U.S. earnings record.

For example, a worker with 20 U.S. Social Security credits can use the equivalent of 20 credits earned in a partner country to meet the 40-credit requirement for retirement. This allows the worker to become eligible for a U.S. benefit they otherwise would not receive. The same principle applies when qualifying for benefits from the partner country.

The Benefit Application Process

To claim benefits under a totalization agreement, an individual should file with the social security agency of the country where they reside. For example, a person living in the United States files for both U.S. and foreign benefits at a local Social Security Administration office. Someone living in a partner country would file with that nation’s agency.

After an application is filed, the agencies communicate to verify work histories. The agency that took the claim forwards the information to its counterpart, which certifies the periods of coverage earned in its system. You may receive a letter stating you do not qualify on U.S. credits alone while the SSA awaits information from the partner country.

If eligibility is established, the benefit amount is calculated on a pro-rata basis. The U.S. calculates a theoretical benefit as if the entire career was under the U.S. system and then pays a proportional amount based on the share of credits earned in the U.S. For example, if half of a worker’s total career credits were from the U.S., the SSA would pay 50% of the benefit that would have been due for a complete U.S. work history.